TMI Blog2023 (3) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... tipulates that the reasons must be recorded by the prescribed authority for initiating the proceeding and secondly, the principles of natural justice should be followed. Though in the instant case the second ingredient of the proviso has been fulfilled; however, there is no document to suggest that the assessing officer has recorded his reason before initiating the proceeding - it is noteworthy that even after remand by the appellate authority in the revised assessment order the assessing officer has not correctly applied its mind to the requirement of law under Section 35(7) of the Act and rather observed that it is not a case where the assessee has sold the goods at a price higher than what is shown by him. In the case of GIRDHARI LAL NANNELAL VERSUS SALES TAX COMMISSIONER, MP [ 1976 (3) TMI 51 - SUPREME COURT] , the Apex Court, held that for the purpose of levy of Sales Tax it would be necessary not only to show that the source of money has not been explained but also to show existence of some material that such acquisition of money has resulted from transactions liable to Sales Tax and not from other sources. The Assessing Officer has come to the finding that it is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Petitioner : Mr. Sumeet Gadodia, Advocate Mr. Ranjeet Kushwaha, Advocate Ms. Akansha Mittal, Advocate Ms. Prakash Narayan, Advocate For the Respondents : Mr. Rajiv Ranjan, A.G. Mr. P.A.S. Pati, G.A.-II W.P.(T) No. 2222 of 2022 W.P.(T) No. 2221 of 2022 These two writ petitions concerning the same petitioner arise out of the common order dated 1st February, 2022, passed by the learned Commercial Taxes Tribunal, Jharkhand, Ranchi in Revision Case No. JR 04 of 2017 and JR 03 of 2017, whereby the revision petitions of the petitioner have been rejected and the determination of sale price of Iron Ore sold by the petitioner on the basis of average I.B.M. rate in exercise of the powers under Section 35 (7) read with Section 40 (1) of the JVAT Act has been upheld. Since the issue is common in both these writ applications as such the relevant facts of W.P.(T) No. 2221 of 2022 are referred which will suffice to dispose of the issue involved in these cases. 2. The brief facts of the case as pleaded by the petitioner are that the petitioner is having merchant mines of iron ore, namely, Ghatkuri Iron Ore Mines Bihar Iron Ore Mines. Iron ore extracted from mines is k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 40(1) of the JVAT Act, 2005. 4. Being aggrieved, petitioner again filed appeal before the JCCT (Appeal) being Appeal Case No. CB-VAT-A-13/2015-16. However, contrary to its earlier finding, the learned appellate court rejected the appeal of the petitioner. Thereafter, the petitioner filed a revision petition being JR 03 of 2017 before the Commercial Taxes Tribunal, Jharkhand at Ranchi. During the pendency of revision petition, a notice for recovery of disputed amount was issued by the respondents for which petitioner filed separate interlocutory application for stay of the said notice. Vide order dated 30.01.2017, Tribunal passed a conditional stay order by directing petitioner to deposit 35% of arrear of tax. Petitioner filed Writ Petition, being W.P.(T) No. 1152 of 2017, before this Hon ble Court against the stay order dated 30.01.2017. This Court vide its order dated 06.03.2017 stayed the conditional order of the Tribunal. This Court vide its order dated 28.03.2018 ordered that pendency of writ petition will not come in the way of disposal of revision petition. Vide order dated 02.02.2019, this Hon ble Court directed the matter to be listed after disposal of the Revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that petitioner has not sold its goods at higher price than the price shown by the petitioner in its invoices. Thus, section 35(7) of the JVAT Act which permits the assessing officer to determine the market value of goods is not applicable to the facts of the present case. The learned court below has failed to take into consideration the definition of Sale and Sale Price occurring in Section 2 (xlvii) 2(xlviii) respectively of the JVAT Act which in substance provides that the VAT would be levied on the sale of goods and on the consideration received for such sale of goods and not on the basis of market value of the goods in question. Thus, the learned court below has failed to consider the aforesaid provisions of the JVAT Act at the time of deciding the issue of determination of goods sold by the petitioner. Further finding with respect to under-pricing of the goods sold by the petitioner recorded by the assessing officer is totally misconceived and not tenable in the eye of law. It is really un-understandable that why purchaser of petitioner would purchase minerals at a lesser price just in order to evade payment of tax especially when the said purchaser is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling the goods by one or other dealer and the calculation made by the assessing officer of the alleged concealed GTO is wholly unsustainable in the eye of law. However, contrary to the records, the Tribunal in the impugned order has recorded its finding that the grade of iron ore was 63% Fe and, petitioner not in a single transaction of sale, reflected the sale of iron ore as a Run of Mines (ROM). Further, the Tribunal has held that the ore of grade 63% Fe was sold at a rate more than Rs.3,000 per MT and the lesser grade of iron ore of 62.95% Fe was sold at a rate of less than Rs.300 per MT. On the basis of the said perverse finding, the Tribunal has held that the petitioner was unable to explain variation of quality of iron ore as well as rate of iron ore and thus; the said transactions of the petitioner are colorable transaction and the provision of Section 35(7) of the JVAT Act has rightly been invoked by the assessing officer as on the basis of the aforesaid finding, the assessing officer was satisfied that the price of goods has been under-priced by the petitioner. Further, in the impugned order, the Tribunal has recorded a specific finding that petitioner was guilty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of sale price of an assessee. However, inspite of the said observation, the Tribunal has proceeded to confirm the revised order/appellate order, wherein the rate of IBM has been taken as the yardstick for determining the sale price of the Petitioner. Thus, the finding of the tribunal is itself contrary. At this stage, it is categorically stated that the quantity of goods sold has not been disputed either by the assessing officer or the learned appellate court or by the Tribunal. Further, nowhere the returns of the petitioner have been disputed by the learned Court below. In fact, the remand order passed by the learned appellate court was limited remand order and the revised order should have only confined to the facts that whether petitioner has sold its goods at a higher price than shown in invoice. But the assessing officer has exceeded its jurisdiction and has held that the instant case relates to under-pricing of goods sold by the petitioner. Surprisingly, learned Tribunal has not appreciated it. Without appreciating the above submission, learned appellate court has confirmed the revised order passed by the assessing officer which is itself contrary to the earlier o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed on the basis of market price of goods sold by the said dealer. 7. Learned counsel contended that prior to amendment carried out in Section 40(2) vide notification bearing no. LG18/2013-08/LJ dated 02.07.2014, only interest was leviable on the alleged concealed turnover. In fact, at the time of original assessment order, the learned assessing officer has imposed interest upon the petitioner under Section 40(2) of the JVAT Act but, just in order to artificially enhance the alleged amount due against the petitioner, penalty under Section 40(1) has been imposed upon the petitioner while passing the revised order which is wholly illegal, untenable in the eye of law. It is pertinent to mention here that the revised order has been passed in compliance to the limited remand order passed by the learned appellate court and, therefore, penalty under Section 40(1) of the JVAT Act could not have been imposed upon the petitioner. However, learned appellate court has failed to consider this fact which is itself contrary to the earlier order passed by the learned appellate court. To the utter surprise of the petitioner, learned appellate court has recorded its finding that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ferrous wise, grade wise mentioned rate of IBM. A comparative chart has been furnished by the learned State counsel, culled out from the invoices produced by the petitioner for both periods 2010-11 and 2011-12 indicating that the quality of ferrous content in most of the invoices issued by the petitioner of the nature of ROM are more than 60% ferrous content, though the invoices indicate the lower price than what was the rate for the iron ore of the quality of fines or lumps having more than 60% ferrous content. The basis for initiation of the proceedings by the assessing officer was this satisfaction that the petitioner has sold the iron ore at a higher price than shown by him in these invoices. Thus, the ingredients of Section 35 (7) of the JVAT Act were satisfied for proceeding against him in terms of Section 40 (1) of the JVAT Act. Pursuant thereto; notices were issued under Section 40 (1) and 40 (2) upon the petitioner for the relevant assessment years by order dated 17.10.2012 concerning the assessment year 2011-12 and 28th January, 2013 for the year 2010-11. Since the Assessing officer found a case of underpricing, the assessment orders dated 31st January, 2013 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a standard government organization. Rates published are reliable and also proper. According to the learned tribunal also there cannot be any evidence of underpricing to the effect that the goods are sold at a price higher than what is reflected in the sale invoices, as such, such sale transactions are generally colourable transaction between the buyer and the seller. The documents available showed that the goods were sold at a higher price and there was no requirement to take recourse to the provision of 35 (7), rather the assessment order could have been passed in terms of Section 35 (5) and 35 (6) of the JVAT Act. Only when such evidence is not there and on the basis of enquiry conducted by the assessing officer, he was satisfied that the goods have been underpriced, then a case under Section 35 (7) is made out. 10. According to the learned tribunal the entire plea of violation of the principles of natural justice also do not have any factual basis. The variance in the sale price compelled the authority to take the average price notified by I.B.M., which does not suffer from any illegality. Therefore, enhancement of gross turnover by enhancing the same value by fixing it with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has not found that petitioner has sold its goods lesser than the price shown in sale invoices of the petitioner. Thereafter, a revised assessment order was passed. In the revised assessment order though the assessing officer held that the petitioner has not sold goods at a price higher than the price reflected in its sale invoice; however, he observed that the dispute relates to underpricing by the petitioner which has come to the knowledge of the learned assessing officer after enquiring from businessmen. However, this time at the time of passing of revised assessment order, the AO has compared the sale price of the petitioner with IBM Rate only and has proceeded to levy penalty three times of alleged concealment of tax u/s 40(1) of the JVAT Act, 2005. The AO further u/s 81 of the JVAT Act, 2005, passed review order wherein two times penalty has been imposed u/s 40(1) of the JVAT Act, 2005. 12. After going through the aforesaid facts and the history of the case it appears that to decide the lis involved in this case, section-35 of JVAT Act play an important role as it deals with assessment and self-assessment. For brevity, Section 35 is quoted herein below: 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vised returns as the case may be, and self assessment claim are prima-facie correct, consistent and complete, he shall accept the self assessment as filed by the dealer and shall assess the amount of tax and interest due from the dealer on the basis of such returns, after making prima-facie adjustment in the nature of arithmetical errors, if any, in the returns and the self assessment; (6) In the circumstances, if the self-assessment under sub-section (1), (2), (3), (4) and (5) has not been filed within the prescribed time, the prescribed authority shall serve on such dealer a notice in the prescribed manner requiring him on a date and at a time and place to be specified therein either to attend in person or through an authorised representative or to produce or to cause to be produced any accounts and other evidences on which such dealer may rely in support of such returns and claims thereof and assess the dealer, the amount of tax and interest due from the dealer on the basis of such returns which have come on records and after making such adjustments as may be necessary including (i) disallowance of claim of input tax credit, exemptions, discounts and deductions and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (a), where the prescribed authority has reasons to believe that the dealer has concealed, omitted or failed to disclose willfully, the particulars of such turnover or has furnished incorrect particulars of his such turnover and thereby return figures are below the real amount, the prescribed authority shall proceed to assess or reassess the amount of tax due from the dealer in respect of such turnover and the provisions of this Act, shall so far as may apply accordingly and for this purpose, 'the dealer shall pay by way of penalty, a sum equal to thrice the amount of additional tax assessed. (2) If the prescribed authority in the course of any proceeding or upon any information, which has come into his possession before assessment or otherwise, under this Act, and is satisfied that any registered dealer or a dealer to whom the registration certificate has been suspended under sub-section (7) of Section 25 (a) has concealed any sales or purchases or any particulars thereof, with a view to reduce the amount of tax payable by him under this Act, or (b) has furnished incorrect statement of his turnover or incorrect particulars of his sales or purchases in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereunder :- After passing the assessment order pursuant to such notice under Section 40(2) of the Act, the matter was remanded by the Appellate Authority. Thereafter by invoking provisions of Section 35(7) read with Section 40(1) of the JVAT Act the revised assessment order was passed which has been affirmed up to the learned Tribunal and is impugned herein. 14. The relevant case of the petitioner has been recorded in the order dated 05.07.2022 which is extracted hereunder for both the periods 2010-11 2011-12: 05.07.2022: The two writ petitions relate to assessment years 2010-11 and 2011-12 and arise out of the common order passed by the learned Commercial Taxes Tribunal, Jharkhand, Ranchi dated 01.02.2022. Regarding the third revision application No. JR 02 of 2017 for the period 2009-10, the learned Tribunal has held that the assessment proceedings were time barred. Learned counsel for the petitioner submits that after making an assessment under Section 40(2) of the JVAT Act, 2005, on an erroneous pricing index obtained by comparing prices of three neighbouring mines, the petitioner was levied with enhanced tax liability. The matter was rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly if he is a manufacturer. In such cases, his price structure has to be scrutinized by the Department under the sales tax law to find out the real sale price receivable by him. There may be cases where he is required to give a discount on account of defect in quality or delay. The important thing to be noted is that price is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchase of the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale, the duties, if any, levied on the particular goods bought by him, the octroi duty, which he may have had to pay and his own margin of profit after meeting handling charges including interest on the capital invested. The cost price of the goods actually paid by him under various heads of accounts would no doubt constitute the consideration for which he would part with his title to the goods. The entire amount of consideration, including the sales tax component, which the purchaser pays, would constitute the price of goods. To this extent, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to show that the source of money has not been explained but also to show existence of some material that such acquisition of money has resulted from transactions liable to Sales Tax and not from other sources. 17. The relevant part of the revised assessment order is quoted herein below: From the above extracts of the revised assessment order, it clearly transpires that the Assessing Officer has come to the finding that it is a case of underpricing . The finding with respect to underpricing of the goods sold by the petitioner recorded by the assessing officer is not tenable in the eye of law. Further, assessing officer in its revised order has stated that underpricing of the petitioner has been occasioned due to connivance of the seller and the purchaser, but no details of such enquiry has been mentioned in the revised order. The lower court records do not show that any such enquiry was conducted by the learned assessing officer to conclude underpricing done by the petitioner before proceeding to impose tax and penalty under Section 40(1) based on the IBM rates. Even the appellate authority on the second occasion in its order dated 26.11.2016 accepted the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efrain from making any observation on the merits of the case regarding the levy of tax and penalty upon the petitioner under Section 35 (7) r/w Section 40 (1) of the JVAT Act. The judgment relied upon by the learned Advocate General i.e. M/s VEENA THEATRE, PATNA and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH (supra) relate to cases of best judgment assessment after the rejection of Books of Account of the Assessee. Since in the present case the requirement of law for initiation of the proceedings have not been fulfilled, these decisions are not of assistance to the present cases. 19. As such, on remand, the AO shall proceed strictly in accordance with law. The petitioner shall be at liberty to raise all the grounds available to him before the AO which shall be considered accordingly. 20. Learned Tribunal has completely failed to consider that the requirement of law for initiating a proceeding under Section 35(7) by recording reasons has not been fulfilled by the Assessing Officer even after remand by the Appellate Authority on the first instance. Consequently, the common impugned order dated 1st February, 2022, passed by the learned Commercial Taxes Tribunal, Jharkhand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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